Bristow Group Reports Second Quarter Fiscal Year 2018 Results

HOUSTON, Nov. 8, 2017 /PRNewswire/ -- Bristow Group Inc. (NYSE: BRS) today reported the following results for the three and six months ended September 30, 2017. All amounts shown are dollar amounts in thousands unless otherwise noted:

 

"This second quarter's financial performance demonstrates the success of the fiscal 2018 improvements with notable accomplishments including OEM cost recoveries and capex deferrals that provide a significant strengthening of our liquidity position, annual EBITDA guidance improvement and positive free cash flow in the quarter," said Jonathan Baliff, President and Chief Executive Officer of Bristow Group. "Our better than expected EBITDA was a result of higher revenue from increased flying activity across all regions, while also benefiting from the operating leverage created by our lower cost hub structure."

BUSINESS AND FINANCIAL HIGHLIGHTS

• In light of the better than expected financial performance in the first half of fiscal 2018, we are raising our fiscal 2018 adjusted EBITDA guidance to $55 million - $85 million from $15 million - $50 million provided in August 2017 but retain a cautious outlook for the remainder of fiscal 2018 due to the short-term nature and unpredictability of the work driving the improved performance in the September 2017 quarter.
• We have an agreement with an original equipment manufacturer and a letter of understanding with another to recover approximately $130 million in fiscal 2018 related to ongoing aircraft issues and to defer approximately $190 million of aircraft capital expenditures into fiscal 2020 and beyond.
• In early November 2017, we sold Bristow Academy as part of our aggressive portfolio management efforts to improve returns, liquidity and credit quality.
• We had $389.4 million of total liquidity as of September 30, 2017, an increase of approximately $96 million in the September 2017 quarter primarily due to the funding of our $230 million credit agreement. We now expect ending fiscal 2018 liquidity to be in the range of $410 million to $450 million, an increase of $185 million over our August 2017 guidance as a result of the agreement and letter of understanding we have in place with original equipment manufacturers, and other portfolio management efforts.

"Bristow is delivering on our fiscal 2018 priorities of safety improvement, cost efficiencies, portfolio management and increased revenue, and I am incredibly proud of our team members who are delivering safety and efficiency for our clients every day," said Jonathan Baliff. "While we flew safely, flew more, and flew more efficiently in the first half of the fiscal year, the remainder of fiscal 2018 will remain challenging due to continued oversupply of aircraft and less visibility into our clients' demand for aviation services. Our lower cost structure is clearly showing progress, but we must continue to strive to meet the goals of Target Zero safety and our fiscal 2018 priorities as we more effectively compete and ensure our clients' success in the fourth year of this historic oil and gas downturn."

Operating revenue from external clients by line of service was as follows:

The year-over-year increase in revenue was primarily driven by an increase in operating revenue for our oil and gas services in our Europe Caspian, Asia Pacific and Americas regions due to an increase in activity as well as an increase in U.K. SAR services revenue due to additional bases coming online in fiscal years 2017 and 2018. Additionally, our fixed wing services in our Asia Pacific, Africa and Europe Caspian regions have contributed to the increase in operating revenue. The activity level increase across our business was driven mostly by short term contracts, ad hoc and increased flying on existing contracts as we are beginning to see stability in certain markets, especially in the North Sea off of Norway and in the shelf in the U.S. Gulf of Mexico. However, these activity levels remain less predictable and may be offset by decreased activity on certain existing contracts over the second half of the fiscal year.

The year-over-year change in net loss and diluted loss per share was primarily driven by higher income tax, rent and interest expense and a higher loss on disposal of assets in the September 2017 quarter. These unfavorable changes were partially offset by higher revenue in the September 2017 quarter discussed above and impairment charges on inventory recorded in the September 2016 quarter that did not recur in the September 2017 quarter.

The GAAP net loss and diluted loss per share for the September 2017 quarter included the following special items:

• A loss on disposal of assets of $8.5 million ($14.1 million net of tax) primarily related to $8.2 million for impairment charges on assets held for sale (including $6.5 million impairment related to the Bristow Academy disposal group),
• Organizational restructuring costs of $2.7 million ($2.2 million net of tax) included in direct costs and general and administrative expense, which includes severance expense of $2.4 million related to separation programs across our global organization designed to increase efficiency and reduce costs and other restructuring costs of $0.3 million, and
• Tax items of $3.2 million that include non-cash adjustments related to the ongoing impact of valuation of deferred tax assets of $2.5 million and a one-time non-cash tax effect from repositioning of certain aircraft from one tax jurisdiction to another related to recent financing transactions resulting in additional income tax expense of $0.7 million.

The September 2016 quarter was impacted by similar items as reflected in the table at the end of this release.

Excluding the effect of these special items, the year-over-year change in adjusted net loss, diluted loss per share and adjusted EBITDA was primarily driven by the increase in oil and gas, fixed wing and U.K. SAR revenue, and ongoing cost management efforts across our business.

LIQUIDITY AND FINANCIAL FLEXIBILITY

Don Miller, Senior Vice President and Chief Financial Officer, commented, "Our liquidity improved by approximately $96 million to $389.4 million at the end of the September quarter due to the funding of our $230 million credit agreement and the operating cash flow of $15.8 million generated during the quarter. We are raising our expected ending total liquidity as of March 31, 2018 by $185 million to between $410 million and $450 million, as we continue to work with our OEMs to recover costs and minimize our capital expenditures and as we take actions to reduce cost, manage working capital and leverage our existing assets."

"The $130 million cost recovery and deferral of approximately $190 million in oil and gas aircraft capital expenditures into fiscal 2020 and beyond, combined with our focus on addressing our debt maturities, are all part of our commitment to improving liquidity as we navigate through this challenging but somewhat improving market environment."

"We have made significant progress on our four fiscal 2018 priorities of safety improvement; efficiency improvement and cost reductions; optimization of our portfolio and our fleet including reducing or deferring capital expenditures; and revenue growth as we better serve our clients in our Europe and Americas Hubs."

The increase in operating revenue from the September 2016 quarter to the September 2017 quarter was primarily driven by an increase in Norway primarily due to increases in activity and short-term contracts and an increase from the start-up of U.K. SAR bases since the September 2016 quarter. Partially offsetting these increases was a decrease in U.K. oil and gas revenue. Eastern Airways contributed $30.5 million and $29.8 million in operating revenue and $0.2 million and $0.3 million in adjusted EBITDA for the September 2017 quarter and September 2016 quarter, respectively.

Operating income, operating margin, adjusted EBITDA and adjusted EBITDA margin increased from the September 2016 quarter primarily due to the year-over-year increase in operating revenue, but also due to ongoing cost reduction initiatives and less of a negative impact from foreign currency exchange rate changes. These benefits were partially offset by increased rent expense year-over-year.

A substantial portion of our operations in the Europe Caspian region are contracted in the British pound sterling, which depreciated significantly against the U.S. dollar at the end of the September 2016 quarter as a result of Brexit. We recorded a foreign exchange gain of $1.9 million in the September 2017 quarter and a foreign exchange loss of $1.3 million in the September 2016 quarter from the revaluation of assets and liabilities on British pound sterling functional currency entities as of September 30, 2017 and 2016, respectively, which is recorded in other income (expense), net and included in adjusted EBITDA. Net of the translation and revaluation impacts, adjusted EBITDA was negatively impacted by $0.9 million and $4.7 million resulting from the change in exchange rates during the September 2017 quarter and September 2016 quarter, respectively. A further weakening or strengthening of the British pound sterling could result in additional foreign exchange volatility in future quarters.

Operating revenue for Africa decreased in the September 2017 quarter due to an overall decrease in activity driven by the downturn of the oil and gas industry compared to the September 2016 quarter. Activity declined with certain clients and certain contracts ending, reducing revenue, which was only partially offset by an increase in activity with other clients increasing revenue. Additionally, fixed wing services in Africa generated $1.6 million and $0.7 million of operating revenue for the September 2017 quarter and September 2016 quarter, respectively.

Operating income, adjusted EBITDA and adjusted EBITDA margin decreased in the September 2017 quarter primarily due to the decrease in revenue discussed above, partially offset by a decline in direct costs (including a decrease in salaries and benefits). During the September 2017 and September 2016 quarters, we recorded $0.2 million and $4.1 million, respectively, in severance expense resulting from voluntary and involuntary separation programs as part of our organizational restructuring, which is excluded from adjusted EBITDA and adjusted EBITDA margin. The year-over-year devaluation of the Nigerian naira also benefited our results by $1.5 million compared to the September 2016 quarter as expenses denominated in naira translated into less U.S. dollars for reporting purposes.

Operating revenue increased in the September 2017 quarter primarily due to an increase in activity in our U.S. Gulf of Mexico oil and gas operations, additional revenue from the search and rescue consortium in the U.S. Gulf of Mexico and additional revenue in Canada, partially offset by a decrease of operating revenue from Brazil due to no aircraft being leased to Líder in the September 2017 quarter.

Earnings from unconsolidated affiliates, net of losses, increased $1.9 million primarily due to an increase in earnings from our investment in Líder in Brazil related to a favorable change in exchange rates which increased our earnings from our investment in Líder by $0.3 million in the September 2017 quarter and decreased our earnings from our investment in Líder by $1.3 million in the September 2016 quarter.

The increases in operating income, operating margin, adjusted EBITDA and adjusted EBITDA margin were driven by the increase in revenue and earnings from unconsolidated affiliates discussed above.

Operating revenue increased in the September 2017 quarter primarily due to an increase from our fixed-wing operations. Airnorth contributed $24.6 million and $21.5 million in operating revenue and $5.6 million and $3.2 million in adjusted EBITDA for the September 2017 quarter and September 2016 quarter, respectively.

Operating income, operating margin, adjusted EBTIDA and adjusted EBITDA margin increased primarily due to the increase in revenue discussed above and decreased maintenance expense.

During the September 2017 and September 2016 quarters, we recorded $1.4 million and $1.8 million in severance expense related to organizational restructuring efforts, respectively. The severance expense is not included in adjusted EBITDA or adjusted EBITDA margin for the September 2017 quarter and September 2016 quarter.

Operating revenue decreased in the September 2017 quarter primarily due to a decrease in part sales and a decline in Bristow Academy revenue.

Operating loss was reduced from the September 2016 quarter as a result of reduced organizational restructuring cost and the inclusion of $7.6 million of inventory impairment charges in the September 2016 quarter. Adjusted EBITDA decreased primarily due to foreign currency transaction losses of $1.2 million recorded in the September 2017 quarter versus foreign currency transaction gains of $2.8 million in the September 2016 quarter.

During the September 2017 and September 2016 quarters, we recorded $1.1 million and $3.8 million related to organizational restructuring costs, respectively, which along with the $7.6 million of inventory impairment charges in the September 2016 quarter, are excluded from adjusted EBITDA.

GUIDANCE

Guidance for selected financial measures is included in the tables that follow.

BRISTOW ACADEMY SALE

On November 1, 2017, we sold our 100% interest in Bristow Academy, as we continue to execute on our priority to optimize our business portfolio to improve its competitive position during the market downturn. The sales price will be a minimum of $1.5 million to be received over a maximum of four years with potential additional consideration based on Bristow Academy's financial performance.

The sale includes Bristow Academy's entire operation, including training facilities, helicopters and related personnel, at Titusville, Florida, and Minden, Nevada. The sale does not impact recurrent training of Bristow flight crews for ongoing commercial operations. Initial type rating and recurrent pilot training for commercial operations will continue at Bristow's flight-simulator training facilities located in Aberdeen, Scotland, and New Iberia, Louisiana, supplemented with the use of other globally located training centers.

The sale of this non-core business resulted in an impairment of assets of $6.5 million, included in loss on disposal of assets on our condensed consolidated statement of operations, for the three and six months ended September 30, 2017.

With the completion of this sale and similar dispositions of non-core assets in prior fiscal years, we have streamlined our business to focus on our core oil and gas, SAR and fixed wing businesses globally. No significant non-core assets outside of these key areas of concentration remain upon completion of this sale.

CONFERENCE CALL

Management will conduct a conference call starting at 10:00 a.m. ET (9:00 a.m. CT) on Thursday, November 9, 2017 to review financial results for the fiscal year 2018 second quarter ended September 30, 2017.  This release and the most recent investor slide presentation are available in the investor relations area of our web page at www.bristowgroup.com.  The conference call can be accessed as follows:

Via Webcast:

• Visit Bristow Group's investor relations Web page at www.bristowgroup.com
• Live: Click on the link for "Bristow Group Fiscal 2018 Second Quarter Earnings Conference Call"
• Replay: A replay via webcast will be available approximately one hour after the call's completion and will be accessible for approximately 90 days.

Via Telephone within the U.S.:

• Live: Dial toll free 1-877-404-9648

Via Telephone outside the U.S.:

• Live: Dial 1-412-902-0030

ABOUT BRISTOW GROUP INC.

Bristow Group Inc. is the leading global industrial aviation services provider offering helicopter transportation, search and rescue (SAR) and aircraft support services, including maintenance and training, to government and civil organizations worldwide. Bristow has major operations in the North Sea, Nigeria and the U.S. Gulf of Mexico, and in most of the other major offshore oil and gas producing regions of the world, including Australia, Brazil, Canada, Russia and Trinidad. Bristow provides SAR services to the private sector worldwide and to the public sector for all of the U.K. on behalf of the Maritime and Coastguard Agency. For more information, visit bristowgroup.com.

FORWARD-LOOKING STATEMENTS DISCLOSURE

Statements contained in this news release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. These forward-looking statements include statements regarding earnings guidance, expected contract revenue, capital deployment strategy, operational and capital performance, expected cost management activities, original equipment manufacturer recoveries, expected capital expenditure deferrals, shareholder return, liquidity, market and industry conditions. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Risks and uncertainties include without limitation:  fluctuations in the demand for our services; fluctuations in worldwide prices of and supply and demand for oil and natural gas; fluctuations in levels of oil and natural gas production, exploration and development activities; the impact of competition; actions by clients and suppliers; the risk of reductions in spending on industrial aviation services by governmental agencies; changes in tax and other laws and regulations; changes in foreign exchange rates and controls; risks associated with international operations; operating risks inherent in our business, including the possibility of declining safety performance; general economic conditions including the capital and credit markets; our ability to obtain financing; the risk of grounding of segments of our fleet for extended periods of time or indefinitely; our ability to re-deploy our aircraft to regions with greater demand; our ability to acquire additional aircraft and dispose of older aircraft through sales into the aftermarket; the possibility that we do not achieve the anticipated benefit of our fleet investment program; availability of employees; and political instability, war or acts of terrorism in any of the countries where we operate. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings, including but not limited to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2017 and annual report on Form 10-K for the fiscal year ended March 31, 2017. Bristow Group Inc. disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events or otherwise.

Linda McNeill Investor Relations (713) 267-7622

(financial tables follow)

 

 

 

 

 

 

 

 

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SOURCE Bristow Group Inc.